Any tech CEO with serious growth goals will spend a lot of time thinking about how to up the performance of their team. In the name of performance, we’ve seen CEOs call their employees back to the office, mandate the use of AI tools and wax lyrical about how 60+ hour work weeks are the only way to make real progress.
Meanwhile, high-profile companies in Silicon Valley are slicing off the bottom performing percentiles of their staff this year in a bid to up performance. It’s a method many CEOs believe is essential for success; Revolut’s ‘High Performance Playbook’ discusses “exiting under performers as fast as possible” as a pillar of maintaining high performance among teams.
I’m no HR expert, but I’m sceptical about how much cutting “underperformers” helps organisations. For starters, how do you get to the bottom of who is underperforming (the managers or the managed)? What does ‘performance’ even mean? And what effect does axing employees have on the teams left behind? I get that it’s no fun working with someone who’s not pulling their weight, but it seems the issue of underperformance is more nuanced than that.
I sense-checked all this with Francia Street, a seasoned HR executive who has held the chief people officer role in various organisations and now runs her own specialist recruitment consultancy Thryving Women in Tech.
Francia — who started her career in employee relations where her job was, as she put it, to “manage performance and fire people” — tells me the age-old corporate playbook of firing the bottom 10% annually of a company almost "never works." The people left behind “feel afraid and don’t learn anything,” she says. “They start to hide stuff, they start to throw each other under the bus. There is mad toxicity. People start to present things that are just not true, and your best performers leave.”
A healthier way to deal with all this is to implement a proper performance management system, says Francia. Doing so ensures that companies and employees are aligned in their goals and what needs to be done to achieve them. “Managing performance should be daily hygiene,” she says. “It’s a system, not an initiative.”
Below, Francia gives a few tips for how companies can do that.
As with many topics we discuss in Startup Life, I feel I’ve only just scratched the surface on the topic of performance (or lack thereof). Are there any founders out there who think cutting the bottom % is sometimes necessary to make a company perform better? Get in touch.
Define what ‘performance’ means
Performance is a pretty nebulous term and can mean different things to different companies. As a leadership team, define what performance means to you and make the expectations clear to the broader company. Start by asking: “What are we trying to achieve?” And then create a measurable outcome, whether that is doubling your growth or getting to €20m in revenue in X time period.
It’s up to managers to think about how those company goals translate on an individual team level — what is the part your department has to play? — and communicate them to their direct reports. They need to know what is expected of them, and it’s a manager’s job to provide the coaching and support they need to get there.
Create a workforce plan
When people say their company is underperforming, I often challenge that. Is it truly poor performance — or just poor planning? Many companies fall into the trap of rushing to hire people who aren’t the right fit or hiring too many altogether. This leads to performance issues and, often, terminations.
Workforce planning ensures companies have the right people, with the right skills, in place at the right time and cost to meet business objectives.
To create one, start by reviewing your business goals for the upcoming year. Then look at your current team: do you have the right people, with the right skills, at the right levels? If not, what roles need to be added — and when? For example, if you’re planning a major international sales push in summer, how many new salespeople will you need, and what languages or market experience should they have? It’s wise to keep your workforce operating at around 90% capacity to maintain agility and avoid overhiring. This buffer gives you room to respond to new opportunities without putting strain on your existing team. (You can find more information on workforce plans here.)
Have regular conversations with employees
Set clear goals with employees on day one and ensure they know what it means to perform at a high level within the team. Set the goals and KPIs and track their progress over time. Check in with them regularly and ask them how they’re getting on, what their challenges are and how you can help — it’s essential to set up open lines of communication.
If at some point an employee’s performance slips, set up another chat. Tell them their work is dipping below expectations and ask them why that is: is there something else going on you need to know about? Do they need support in a particular area? At this point, the employee is not yet in underperformance territory — the aim is not to call them out but to give them a chance to get back on track.
Offer praise when due
Reward those in the team that perform well against the goals and KPIs set for them. It could be in the form of a bonus or promotion, or simply recognising their work in a team meeting. Offering recognition and encouragement to those top performers goes a long way in keeping them engaged and motivated, ensuring they stick around for the long haul.
Let them go
If you’ve been having regular check-ins with an employee and you feel they’re not performing, despite all the work that has been done on both sides to help them succeed, it’s for the good of the team to let them go. The timeline on this will depend on your company’s needs: I often think three-four months is a fair amount of time to give someone to show they can perform in alignment with the company’s goals; startups on a shoestring budget may not have the money or capacity to wait for someone to perform.
As a manager, it’s important to treat leavers respectfully — not least to ensure you maintain a reputation as a fair employer. A way to handle the conversation is to tell them that this might not be the right role, or company for them and as their manager, you are willing to help set them up for success in whatever they go on to do next.
